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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






2. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






3. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






4. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






5. ATC = TC/Q = AFC + AVC






6. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






7. Ed = 8 - infinite change in demand to price change






8. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






9. Entry of new firms shifts the cost curves for all firms upward






10. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






11. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






12. A good for which higher income decreases demand






13. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






14. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






15. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






16. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






17. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






18. The marginal utility from consumption of more and more of that item falls over time






19. Exists if a producer can produce more of a good than all other producers






20. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






21. Ei = (%dQd good X)/(%d Income)






22. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






23. Two goods are consumer substitutes if they provide essentially the same utility to consumers






24. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






25. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






26. The price of a good measured in units of currency






27. TR = P * Qd






28. Models where firms are competitive rivals seeking to gain at the expense of their rivals






29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






30. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






31. Exists if a producer can produce a good at lower opportunity cost than all other producers






32. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






33. All firms maximize profit by producing where MR = MC






34. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






35. Occurs when LRAC is constant over a variety of plant sizes






36. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






37. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






38. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






39. Ed = 1






40. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






41. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






42. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






43. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






44. The imbalance between limited productive resources and unlimited human wants






45. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






46. Ed = 0 - no response to price change






47. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






48. Ed < 1






49. Ed = (%dQd)/(%dP). Ignore negative sign






50. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient







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